Limitations of Sunshine: Disclosure Laws Do Little to Discourage Undesirable Activities
​​[Posted on: Thursday, March 29, 2018]

It is assumed that greater transparency would discourage undesirable activities but experience shows that the disclosing parties become more careful and use reporting loopholes to their advantage. A review of the California law that requires companies to disclose exorbitant drug price increases seems to show little effect, if any, of such disclosure on such increases. This trend is similar to that seen for the Sunshine Act passed a few years ago has had practically no effect on the compensation provided to doctors by manufacturers. The California law requires drug manufacturers to give major purchasers 60 days’ notice of increases greater than 16% in the wholesale prices of drugs they sell. In the first reports released since the law came into effect, several companies listed increased prices for hundreds of drugs. Most companies announced increases of around 10% while a couple drugs went up by 63 and 49 percent, respectively. These increases seem to be similar to the increases observed in previous years. While drug price increases have been constantly in the news for the last few years, most drug prices increase modestly. It is only a few outliers that get the most publicity. Drug prices are primarily driven by demand and competition, and public disclosure will likely have little, if any, effect on companies deciding the price of the products they sell. On the contrary after a few such disclosures, the reporting process becomes routine and the public becomes numb to such information. Similar trends were seen with the Sunshine Act that was enacted about 4 years ago with the intent to stop the industry practice of providing exorbitant compensations to physicians in order to influence prescribing practices. Even before the passage of the Sunshine Act, physician groups and the industry had already voluntarily implemented payment practices to discourage overt conflict of interest situations to manage the public relations crisis created by the perception of an industry bribing the doctors to take advantage of the patients. Since the Sunshine Act came into effect four years ago, little changes have been seen in the physician payments practices. Most physicians get modest compensation for their consultation work for the industry; it is only a few outliers that get the most publicity. The numbers show that there are no practical changes in the practice since the Sunshine Act. Similarly, the Right-To-Try laws have had mostly rhetorical benefit to patients where the laws exist. What was seen with the Sunshine Act is now happening with the Right-To-Try laws, as well. Passing laws that only require additional information rarely lead to practical benefits. Several states have looked to pass laws similar to the California law for drug price disclosure and while it may create a lot of publicity for the politicians that propose these bills, and the drug industry groups that tend to vehemently oppose such bills, the practical impact on the industry and the public is likely to be minimal. The intent of these laws is arguably good, but the industry has little to fear from these laws, and the public will see little benefit.